Template-Type: ReDIF-Paper 1.0
Author-Name: Ryan Niladri Banerjee
Author-X-Name-First: Ryan Niladri
Author-X-Name-Last: Banerjee
Author-Name: Enisse Kharroubi
Author-X-Name-First: Kharroubi
Author-X-Name-Last: Kharroubi
Author-Name: Ulf Lewrick
Author-X-Name-First: Ulf
Author-X-Name-Last: Lewrick
Title: Bankruptcies, unemployment and reallocation from Covid-19
Abstract: The expected wave of business failures in the Covid-19 recession has yet to materialise, due in part to policy support, but also reflecting the inherent lag between declines in GDP and insolvencies. Bankruptcies weigh heavily on labour markets. Unemployment typically increases three times more if a fall in GDP is accompanied by a similar-sized increase in bankruptcies. Concentration of bankruptcies in those sectors hit especially hard by Covid-19 could exert a significant drag on the labour market. The natural renewal process where young, dynamic firms displace those who exited takes two to three years, leaving a protracted period of lacklustre activity. This underscores the need to reallocate resources quickly and efficiently to drive growth in the post-pandemic world.
Length: 9 pages
Creation-Date: 2020-10-13
File-URL: https://www.bis.org/publ/bisbull31.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/bisbull31.htm
File-Format: text/html
Number: 31
Handle: RePEc:bis:bisblt:31